Jim Henson's Children Put Together a String of Big Deals to Keep Alive : The Muppet Legacy

The simple message sat framed atop Jim Henson's office fireplace--words from an admirer who shared one of his gifts. "Dear Jim," wrote Edgar Bergen over a black-and-white photograph of himself and the inanimate Charlie McCarthy, "Keep the magic alive."

Like Bergen, Henson could bring life to mere objects. Sesame Street, the Muppets, Kermit the Frog--they were only a few examples of his contributions. But without Henson, can the magic live on at his company?

Twenty-six months after his unexpected death, Henson's successors are talking and acting ambitiously: They have cut deals with major corporate partners to mass market an array of new and existing Henson products--from feature films to children's playwear.

"It's not one man's vision" any longer, said 28-year-old Brian Henson, who, with a younger brother and three sisters, inherited the company. "We are a company with a creative team at the top. My father built a company around him; I'm spreading that."

As part of its expansion, Jim Henson Productions Inc. is making two half-hour shows for network television and a feature-length movie. "The Muppet Christmas Carol," directed by Brian, who also is the company's new president, will appear in theaters in December. And Henson Productions recently entered a deal with Wal-Mart for the exclusive retailing of Muppet clothing.

"Brian has done a phenomenal job in picking up the torch and running with it," said Jeffrey Katzenberg, chairman of Walt Disney Studios, which will distribute "Muppet Christmas." "He's done it not only in continuing on with the existing (assets)--but most impressively, (the company is) incredibly productive right now" with new projects.

Said Charlie Rivkin, Henson Productions' 30-year-old chief operating officer: "This is a classic example of converting an entrepreneurial, family run business to a professionally run business. . . . The long-term objective of this company is to become the premier provider of family entertainment programming to the world marketplace."

The company, valued in excess of $100 million before Jim Henson's death, is in the enviable position of carrying no debt, Rivkin said. Neither Rivkin nor Brian Henson would rule out the possibility of a public stock offering.

"We're flattered by the number of (investment bankers) who have been approaching us," Rivkin said, declining to describe in any way the company's annual revenue or cash flow.

To those who might chafe at the notion of Kermit cruising Wall Street, consider the company's outlook just two years ago: When Jim Henson died on May 16, 1990, at New York Hospital, it could also have meant the demise of his company.

Henson's death, of a massive bacterial infection, came suddenly, at age 53, and at a point when his enterprise was about to undergo a drastic transformation.

The company that made learning fun for a generation, the company whose characters could speak with a worldliness also appreciated by adults, the company whose culture was decidedly un- bottom line, was about to merge with Disney--a business-entertainment colossus.

Henson Productions and Disney Co. Chairman Michael D. Eisner had agreed with a handshake--Disney would acquire all of the company's assets, except for Sesame Street. The complex arrangement called for Henson Productions to receive $100 million to $150 million in cash and stock--and the freedom to focus on new creative projects under the Disney tent.

But by December, 1990, the handshake deal had crumbled amid acrimony. Five months later, Henson's five children sued, alleging trademark infringments. They accused Disney of "corporate greed" and "'extreme arrogance." Disney countersued, its spokesman parrying at one point: "There are tears in Mickey's eyes today."

Both sides soon dropped their lawsuits. Yet at Henson Productions, the future remained clouded.

Because of the pending merger and the shifting of its headquarters from New York to Hollywood, the company had delayed developing new projects for about 18 months. In addition, the five Henson children had to weigh any potential sale against the still-pending imposition of estate taxes that will drain roughly 55% of the value of their inheritance. And there was the loss of Jim Henson's immeasurable creativity.

His father's death and the failing of the Disney merger, said Brian Henson, "could have been the end of our company."

Yet it was Brian who, by early 1991, was chosen by his brother and sisters to become president, chief executive and chairman. The company is wholly owned by the Henson children. A daughter, Cheryl Henson, is a board member and the company's liaison to the Children's Television Workshop, the nonprofit group in New York that still produces "Sesame Street." Another daughter, Lisa Henson, also sits on the board. Jim Henson was separated from his wife, Jane, for five years before his death; she holds no stake in the company.